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Image source: White House on Flickr.

This article was updated on Dec. 13, 2016 and was originally published on Jul. 31, 2016. 

It's been more than two years since the Affordable Care Act, commonly known as "Obamacare," was fully implemented, but the controversy surrounding the health law hasn't died down one iota.

In one corner, supporters of Obamacare can rightly point to the lowest uninsured rates on record. The Centers for Disease Control and Prevention notes that the uninsured rate at the midpoint of 2016 was less than 9%, down from 16% at the end of 2013, the year immediately preceding the implementation of Obamacare.Gallup's Q1 2016 data shows an uninsured rate of 11%, down more than six percentage points from Q4 2013. Don't forget that on top of the 10.4 million paying Obamacare customers enrolled in the marketplace exchanges as of June 30, 2016, there are nearly as many people who've gained access to medical care through the expansion of Medicaid programs in 31 states.

In the other corner are those who can be rightly critical of the program. Despite being told by President Obama that "you'll be able to keep your doctor," millions of Americans lost their primary care physicians and health plans because of beefed-up minimum benefit requirements. Additionally, many consumers aren't too keen on the penalty associated with not purchasing health insurance.

However, premium inflation is arguably what's drawing the most debate and ire surrounding Obamacare. A June analysis from the Kaiser Family Foundation of the lowest-cost silver plans in 14 major cities suggested that premium costs could rise by 11% in 2017.

And who do we find in the middle of this battle? Consumers and insurers.

It's been well-documented that consumer opinions of Obamacare tend to largely be driven by whether or not it has had a direct impact on them or their wallet. Some insurers, though, have also had a negative experience with the program thus far.

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Image source: Getty Images.

Insurers have mostly taken it on the chin

Initially, Obamacare was expected to enroll 21 million new people by the end of 2016, at least according to projections from the Congressional Budget Office in 2013. Currently, this figure is about 10 million shy of the CBO's projections from three years ago, and it could fall further as attrition due to non-payment continues. Having fewer enrollees than initially expected is certainly not an ideal picture for insurers when the margins associated with Obamacare enrollees are typically much narrower than through other forms of enrollment. The smaller scale will likely only hurt profitability.

Obamacare enrollees have also tended to be a costlier, sicker group of individuals. According to a large analysis conducted by the Blue Cross Blue Shield Association, Obamacare enrollees cost, on average, 22% more per month than persons enrolled in an employer-sponsored health plan. This probably isn't too much of a shock considering that prior to Obamacare there were rules in place that allowed insurers to turn away people with pre-existing conditions. Under Obamacare, insurers can't do this anymore, meaning sicker individuals have been among the first to enroll, leaving insurers with an adverse patient pool. 

The risk corridor has also been an utter failure. The risk corridor was a risk-pooling program created among insurers to encourage new entrants into the marketplace. It was to be funded by overly profitable insurers, and it would pay out funds to insurers who lost excessive amounts of money from pricing their premiums too low. Unfortunately, of the $2.87 billion in funds requested by money-losing insurers, just 12.6% was paid out.

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Image source: Getty Images.

Has an Obamacare exodus begun?

The result of fewer and costlier enrollees, as well as the failure of the risk corridor, has been excessive losses for quite a few insurers.

UnitedHealth Group (NYSE:UNH), the nation's largest health-benefits provider, has cautioned investors that it could lose around $500 million in 2016 from its Obamacare plans. Thankfully for UnitedHealth, the vast majority of its income comes from commercial plans and underwriting Medicare Advantage policies, not Obamacare plans. Nonetheless, UnitedHealth Group doesn't foresee Obamacare's misfortunes turning around anytime soon. Instead of operating in the 34 states it's in for 2016, UnitedHealth has chosen to exit 31 of those 34 states in 2017. This time next year, UnitedHealth will sell plans in only Nevada, New York, and Virginia.

And UnitedHealth isn't alone. Humana (NYSE:HUM), which is potentially losing even more money on the Obamacare exchanges than UnitedHealth, had previously warned that it would be paring back its coverage come 2017. Humana's management team announced that it would reduce its county-based coverage in 2017 by nearly 90%. This decision to scale back was made even easier when the Obama administration announced it would step in to block a proposed merger between Humana and Aetna.

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Image source: Getty Images.

This apparent "Obamacare exodus" isn't confined to national insurers, either. The failure of the risk corridor left many of Obamacare's approved healthcare cooperatives to fend for themselves. Designed as a low-cost option, most of these co-ops simply priced their plans far too low. In just over two years, 17 of 23 co-ops have gone out of business, with five of the remaining six on corrective action plans, implying a very questionable financial situation for the remaining co-ops. 

In order to counter these losses, insurers are faced with two tough choices: cut costs or raise prices. Since the Obama administration has generally opposed consolidation in the insurance sector, which insurers argue would reduce costs via synergies, hefty price increases are what remains as a solution. However, some insurers, like Humana and UnitedHealth, remain skeptical that massive price hikes will represent a cure-all for the program.

Spots of sunshine emerge, but plenty of clouds remain

There are, however, a few rays of sunshine interspersed throughout the health insurance industry. Perhaps the brightest stars of the bunch have been Anthem (NYSE:ANTM), best known for operating the Blue Cross Blue Shield brand in 14 states, and Centene (NYSE:CNC), which had predominantly been a government-sponsored care provider prior to Obamacare's implementation.

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Image source: Getty Images.

The secret to success for both Anthem and Centene has been their focus on consumers either fully paid for through Medicaid or partially subsidized via the Advanced Premium Tax Credit, or APTC. The APTC is the subsidy available to persons making between 100% and 400% of the federal poverty level. Although government-sponsored care may mean lower margins than a patient without government-sponsored care would provide, money from the government is a guaranteed payment for insurers. Insurers are also less liable to see patients who are having some or all of their medical care subsidized drop their coverage. Anthem's acquisition of Amerigroup and Centene's continued focus on cost-conscious consumers have really paid off, giving both insurers an opportunity to expand while UnitedHealth and its peers have failed.

Choices for the consumer have declined in 2017 compared to 2016, which isn't a good omen for Obamacare's promise to promote competition and reduce premium inflation. It's quite possible higher premiums could chase away millions of Americans who aren't receiving subsidies. Conversely, if insurance commissioners try to push back against lofty increases in the future, more insurers could reign in their coverage.

We could be nearing an inflection point for Obamacare in 2017 that could have a very dramatic effect on your wallet and health.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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